Detailed answer — how release of trust/escrow funds works under Missouri law

This question usually arises in real estate closings where a buyer’s purchase money is held by an escrow agent, title company, attorney, or broker until closing conditions are satisfied. The key legal concepts are (1) escrow/instruction terms, (2) delivery of the deed (and whether title has actually passed between the parties), and (3) recording and its effect on competing claims.

1. What controls: the escrow instructions and the parties’ agreement

Escrow and trust holders must follow the written escrow instructions or trust agreement. If the escrow instructions say “disburse funds only after the deed is recorded,” the holder should wait for recorded proof before releasing funds. If the instructions permit release on delivery of a properly executed deed or other conditions, the holder may release funds even if recording has not yet occurred.

2. Delivery of the deed vs. recording

In Missouri, as in most states, recording is a notice mechanism; actual transfer of ownership requires delivery of the deed (and the deed must satisfy statutory requirements, such as execution and acknowledgment where applicable). If a deed has been validly delivered, the buyer holds title as between the parties even if the deed is not yet recorded. But unrecorded deeds are vulnerable to competing claims from later purchasers or creditors who did not have notice.

3. Recording protects priorities

Missouri’s recording laws provide public notice that helps determine priority among competing interests in property. For general reference see the Missouri Revised Statutes on conveyances and recording: RSMo Chapter 442 (Conveyances; recording). Recording does not always change the underlying validity of a deed between the original parties, but it protects the new owner against subsequent purchasers and many creditors.

4. Common practical rules used by title companies and escrow agents

• Title companies and lenders typically refuse to disburse loan proceeds until a recorded deed and/or mortgage is on file or until they receive confirmation that recording was completed. This reduces risk of a payoff without clear, recorded security.
• If recording is delayed for administrative reasons (e.g., county recorder backlog), escrow holders may obtain agreement in writing from all parties to disburse funds earlier. Many closings use written escrow instructions that explicitly allow conditional disbursement on delivery of the deed to escrow or on the responsibility of the recipient to record.

5. Risks when funds are released before recording

If funds are released while the deed remains unrecorded, problems can include:

• A competing buyer or creditor who obtains priority by recording first;
• Claims that the escrow agent breached instructions or committed conversion by releasing funds improperly;
• Difficulty undoing a disbursement if the seller refuses to record or if title defects appear after funds change hands.

6. Remedies and next steps if funds were released improperly

If an improper disbursement occurs, possible remedies in Missouri include suing the escrow holder for breach of contract, conversion, or negligence; seeking an injunction or declaratory relief to prevent further transfers; and pursuing quiet title or reformation actions depending on the facts. Acting quickly is important — for example, recording a corrective document (affidavit, release, or notice) or filing a lis pendens and a claim in court can preserve issues while you seek a legal remedy.

7. Practical example (hypothetical)

Buyer A deposits $150,000 with a title company in St. Louis to buy Seller B’s house. The seller executes and delivers a deed to the title company, but the county recorder hasn’t yet stamped the deed because of a temporary staff backlog. The escrow instructions say “disburse upon delivery of the deed.” The title company may disburse funds under those instructions, but Buyer A faces a risk: if Seller B secretly conveys the same property to Buyer C who records first, Buyer A’s recorded priority could be challenged. If the instructions had required “disburse after recording,” the title company should wait for recorded proof before disbursing.

Bottom line

Under Missouri law, funds held in trust can be released before a deed is recorded—but only if the escrow or trust instructions, the parties’ agreement, and the facts (such as valid delivery of the deed) authorize release. Recording provides crucial public protection and priority; when recording is required by the instructions or by a lender/title company policy, the holder should not disburse funds until recording is confirmed. If funds were released contrary to instructions or without authority, the injured party may have civil claims and should consult an attorney immediately.

Relevant Missouri statute resource: see the Missouri Revised Statutes on conveyances and recording: RSMo Chapter 442 (Conveyances; recording).

Helpful hints

• Before closing, require written escrow instructions that clearly state the exact condition for disbursement (e.g., “after recording” vs. “upon delivery of deed”).
• Ask the escrow holder or title company for tracking info and final recording confirmation (recording clerk stub, recording number, or electronic confirmation).
• If you are a buyer, insist on a recorded deed before final disbursement whenever possible, particularly in high-risk transactions.
• If a lender is involved, expect stricter requirements: lenders usually require recorded mortgage and deed before disbursing loan proceeds.
• If the deed isn’t recorded promptly, get written assurances from the party holding the deed and consider obtaining a short written extension of escrow instructions rather than authorizing an early payout.
• If funds were released improperly, preserve all documents and communications, take screenshots of confirmations, and contact an attorney immediately to discuss injunctive relief or damages claims.
• Title insurance can protect against many post-closing recording risks. Ask which risks are covered and when coverage attaches.